Correlation Between Transgene and Innate Pharma

Can any of the company-specific risk be diversified away by investing in both Transgene and Innate Pharma at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Transgene and Innate Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transgene SA and Innate Pharma, you can compare the effects of market volatilities on Transgene and Innate Pharma and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Transgene with a short position of Innate Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transgene and Innate Pharma.

Diversification Opportunities for Transgene and Innate Pharma

0.89

Correlation Coefficient

Transgene  Innate Pharma

Very poor diversification

The 3 months correlation between Transgene and Innate is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Transgene SA and Innate Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innate Pharma and Transgene is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Transgene SA are associated (or correlated) with Innate Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innate Pharma has no effect on the direction of Transgene i.e., Transgene and Innate Pharma go up and down completely randomly.

Pair Corralation between Transgene and Innate Pharma

Assuming the 90 days trading horizon Transgene SA is expected to under-perform the Innate Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Transgene SA is 1.06 times less risky than Innate Pharma. The stock trades about -0.18 of its potential returns per unit of risk. The Innate Pharma is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  208.00  in Innate Pharma on September 13, 2024 and sell it today you would lose (48.00) from holding Innate Pharma or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Transgene SA  vs.  Innate Pharma

Transgene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transgene SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Innate Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innate Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Transgene and Innate Pharma

The main advantage of trading using opposite Transgene and Innate Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transgene position performs unexpectedly, Innate Pharma can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Innate Pharma will offset losses from the drop in Innate Pharma's long position.

The idea behind Transgene SA and Innate Pharma pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.